FedEx Sees Q4 Income Rise But Warns on Q1

FedEx Corp.'s fourth-quarter net income climbed 9 percent, but the air express carrier said its first-quarter earnings could fall below Wall Street estimates because of high fuel prices.

Earnings totaled $448 million for its fourth quarter, which ended May 31, up from $412 million a year earlier.

FedEx, Memphis, TN, also reported revenue of $7.72 billion, up 10 percent from $7.04 billion the previous year; operating income of $740 million, up 8 percent from $685 million; and an operating margin of 9.6 percent, down from 9.7 percent the previous year.

FedEx said its operating margin in the quarter was hurt by costs associated with the start of a new westbound around-the-world flight in support of future international growth at FedEx Express.

Average daily package volume at FedEx Express and FedEx Ground combined grew about 6 percent year-over-year for the quarter, based on continued growth in international express, ground and U.S. domestic express shipments.

Earnings for the full year totaled $1.45 billion, up 73 percent from last year's $838 million.

FedEx also reported full-year revenue of $29.4 billion, up 19 percent from $24.7 billion; operating income of $2.47 billion, up 72 percent from $1.44 billion; and operating margin of 8.4 percent, up from 5.8 percent the previous year.

FedEx said it expects earnings of $1.10 to $1.25 per diluted share in the first quarter of fiscal 2006. Reportedly, analysts on average expected FedEx to earn $1.48 a share on sales of $7.82 billion.

This earnings guidance reflects the recent escalation in jet fuel prices, which are expected to remain high during the quarter. The guidance also reflects the time lag associated with an Express fuel surcharge, continued startup expenses related to the around-the-world flight and minimal U.S. domestic base yield growth in the company's package services due to a competitive pricing environment.

Meanwhile, United Parcel Service yesterday reaffirmed its financial guidance for the second quarter of 2005, saying it expected diluted earnings per share in a range of 82 to 87 cents compared with the 72 cents reported in the prior-year period.

The Atlanta company also reiterated that volumes were growing as expected in the quarter with U.S. domestic volume growth ahead of original projections and international export growth maintaining its strength with double-digit growth.

Melissa Campanelli covers postal news, CRM and database marketing for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters

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